Stamp Duty On An Arbitral Award: Mohini Electricals Limited V Delhi Jal Board1
30 January 2021
The Delhi High Court has clarified that: (i) stamp duty is only to be paid on an arbitral award at the time of enforcement, and (ii) a photocopy of an award is not an “instrument” under the Indian Stamp Act 1899, and therefore cannot be impounded.
The decree holder filed a petition to enforce an arbitral award. In support, a photocopy of the award was filed which showed that the award was insufficiently stamped. The decree holder filed an application seeking exemption from filing the original award, which was allowed as there was no objection from the judgment debtor. The decree holder subsequently filed the original award having paid the correct amount of stamp duty.
The Court directed the judgment debtor to deposit the awarded amounts. The judgment debtor objected saying that the photocopy of the award showed that it had been insufficiently stamped and it therefore ought to have been impounded before any deposit orders were passed. The judgment debtor said that the subsequent payment of stamp duty was inconsequential.
The Court held that there is no obligation to pay stamp duty at the time of signing or pronouncement of the award. According to Supreme Court judgments2, stamp duty needs to be paid only when parties “begin taking steps” to enforce the award under §36 of the Arbitration & Conciliation Act 1996. The Tribunal does not have the power to direct the parties to pay stamp duty within a specific timeframe.
The judgment debtor could have objected when the photocopy of the award was initially filed showing that inadequate stamp duty had been paid, but having not done so the judgment debtor had missed its opportunity and could not ask for impounding the photocopy at a later stage.
While an execution court would have to impound an unstamped award and forward it to the collector for collection of stamp duty in order to cure the defect, a photocopy is not an “instrument” under the Indian Stamp Act 1899 and therefore cannot be impounded.
The decision ensures that the State's revenue is secured but also provides a means to award holders to cure the non-payment of stamp duty rather than bringing the proceedings to a standstill. However, judgment debtors will have to be vigilant and raise timely objections to protect their rights as the usual tendency is to not object to routine exemption applications.
1 Decision dated 22 January 2021 passed by the Delhi High Court in OMP (ENF)(COMM) 2 of 2020
2 M Anasuya Devi & Anr v M Manik Reddy & Ors (2003) 8 SCC 565
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